The importance of giving notice of assignment
GENERAL NUTRITION INVESTMENT v HOLLAND AND BARRETT [2017]
Some notices of termination served by the party to whom a trade mark licence was assigned were found to be invalid because no notice of the assignment had been given to the licensee before they were issued.
Facts:
- The party who granted a trademark licence (“original licensor”) to Holland and Barrett (“H&B”) assigned its rights under the licence to General Nutrition Investment Company (“GNIC”), a member in the same corporate group, through a series of written agreements. The original licensor was then dissolved and ceased to exist.
- H&B was not given notice of the assignment by GNIC but GNIC served a number of termination notices on H&B purporting to end the licence for breach.
- The Court was asked to determine whether GNIC was entitled to serve the termination notices.
Decision:
- It was decided that the termination notices served by GNIC were all invalid because no prior notice of the assignment had been given to H&B.
- The Court did not dispute the well-established principles that:
- as between the parties to an assignment, the assignment is effective and fully enforceable without notice having been given to the party who was granted the licence (licensee);
- the party to whom a licence is assigned (assignee) can enforce a claim against the licensee, for example to recover a debt, by joining the party who assigned the licence (assignor) to the claim;
- a Court may waive the procedural requirement to join the assignor to the claim.
- However, the judge found that this case was different from an action simply to recover a debt. Serving a notice to terminate was regarded as a matter of greater substance since it seeks to vary the legal relationship and contractual rights of the parties rather than just enforcing them. The judge commented that H&B could not be expected to accept a notice under the licence which turns out to have come from the assignee, namely GNIC, when it had never been given notice of that assignment. In each case, the licensee who receives the notice must be told that it comes from the assignee.
Points to note:
- This decision may very well be appealed. However, for the time being, assignees should always ensure that notice of the assignment is given to the other contracting party otherwise it may not be able to enforce all of the contractual rights transferred to it under the assignment. So when taking on the role of a licensor of trade marks, for example, it is important to give notice of the assignment to all the current licensees to ensure that the terms of the licence can be enforced.
- The judge did not specify which party must give the notice of assignment – it may come from either the assignee or the assignor. It may be more natural for the assignor to give the notice, given that it has the original relationship with the other contracting party, but it is suggested that notice by the assignee should suffice. That may be very important where, as in this case, the assignor no longer exists.
- Some of the other issues raised by this case in relation to termination notices were:
- whether the termination notices were sufficiently clear and unambiguous for the purpose of validly exercising the termination rights? GNIC served a total of five notices. Notices have to be clear as to exactly who is issuing them and if they are being issued on behalf of an assignee, some explanation should be given as to why the assignee was giving the notice. Notices may be valid even if they contain some errors provided they are “sufficiently clear and unambiguous to leave a reasonable recipient in no reasonable doubt as to how and when they are intended to operate”;
- the notices must clearly and unambiguously communicate the identity of the person making the decision to terminate who was entitled to make it. In this case the notices all failed this test because two companies (the original GNIC and the the ‘newco’ GNIC) at different times had exactly the same name. On their face, the notices appeared to be referring to a company which, unknown to H&B, no longer existed